The proverbial cat is out of the bag. Verizon is acquiring Alltel for $5.9 billion, plus the assumption of $22.2 billion in debt, a deal that was first reported by CNBC yesterday. “This is a perfect fit, with Alltel’s high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies,” says Verizon CEO Ivan Seidenberg. Alltel serves more than 13 million customers in markets in 34 states, primarily in more rural markets. Verizon expects the deal to close by the end of the year.

As we noted in an earlier post, this deal creates some interesting competitive implications, all of which can’t be examined this quickly. The deal seems to have come together really fast. There must have been some motivated principals. The Wall Street Journal reports that the previous buyers of Alltel were anxious to sell because their original leveraged buyout terms were becoming increasingly “ugly.” They are basically breaking even on the deal, and avoiding potential losses, because the complex debt transactions of the original buy out are now coming back to haunt them because of the credit crisis in the U.S. economy. The new outcome, if it passes regulatory muster, will create the largest wireless carrier in North America, with 80 million or so subscribers. By our estimation, Verizon, the quintessential traditional wireline telephone company, will now have double the number of wireless subscribers, compared to its wireline access lines (40 million as of their last quarterly report). Perhaps we should start thinking of Verizon as a wireless company with some wireline assets, as opposed to the opposite.

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3 comments

I foresee this as another FCC rubber-stamp without any regards for the consumer. Here’s what happened when Alltel purchased CellularOne two years ago in our area:
The FCC said that in area where Alltel and CellOne directly compete, Alltel had to sell it’s newly acquired CellOne properties to a new competitor, which turned out to be US Cellular.
In my personal case, living in a Nebr town close to the South Dakota border, Alltel has terrible coverage in our town, but CellularOne was great and had service all the way to the Canadian border. So with the merger, my contract was sold to US Cellular as well as the spectrum and CellularOne towers, etc.
The next thing I know, US Cellular does not honor my Cellular One plan, which I was still under contract. My monthly cost rose $5-$10. Ok. I’m not happy but can live with that.
But since US Cellular One has no spectrum in So Dakota, now all of a sudden when I drive 15 miles from home and near the SD border, I’m roaming. So previously when I had Cellular One with 5-state home area, NOW I’m roaming when I travel 15 miles from home. So to get the same plan and calling area coverage as when I had CellularOne, I have to take US Cellular’s NATIONAL plan, an increase of about $30 per month. (Oh yeah- this merger is good for the consumer! – NOT)
No amount of researching different plans and options with US Cellular CSRs and their supervisors could come up with a better solution.
Bottom line: The merger was terrible for any consumer living in certain border situations…and there’s lots of us.
IF the FCC rubber-stamps this new merger, expect customers to howl, but no one’s gonna listen!
What ever happened to the anti-trust laws? Do they only apply to landline phone companies?
In the past the FCC has turned a blind eye and has given the cellular companies anything and everything they’ve ever asked for. It’s time the FCC pulls its head out of the sand.

[…] engineered a swap of wireless assets (and some cash) in order for Verizon to gain approval for its acquisition of the former rural wireless carrier Alltel. The swap involved AT&T buying approximately 1.5 million new subscribers across an 18 state […]

[…] of Alltel has been bought and sold a couple times since its formation, with the majority of it now a part of Verizon Wireless and other parts of it with AT&T (although a much smaller version of Alltel Wireless still […]